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The effects of gallery and artist reputation on prices in the primary market for art

Author

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  • Susanne Schönfeld

    (Department of Economics, Vienna University of Economics & B.A.)

  • Andreas Reinstaller

    (Department of Economics, Vienna University of Economics & B.A.)

Abstract

This paper advances a decision theoretical foundation for pricing scripts by means of a simple model of product differentiation implementing the undercut-proof equilibrium concept. We argue that while sociological factors play undoubtedly an important role, economic analysis can complement the insights from economic sociology on pricing in the primary art market. Our model analyzes the effects of the gallery's and the artist's reputation on the price the gallery charges. The results suggest that prices positively correlate with an artist's reputation and negatively correlate with a gallery's reputation. The model may therefore explain the results of recent empirical studies that have led to similar results.

Suggested Citation

  • Susanne Schönfeld & Andreas Reinstaller, 2005. "The effects of gallery and artist reputation on prices in the primary market for art," Department of Economics Working Papers wuwp090, Vienna University of Economics and Business, Department of Economics.
    • Handle: RePEc:wiw:wiwwuw:wuwp090
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    References listed on IDEAS

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    1. Adler, Moshe, 1985. "Stardom and Talent," American Economic Review, American Economic Association, vol. 75(1), pages 208-212, March.
    2. Gerard-Varet, Louis-Andre, 1995. "On pricing the priceless: Comments on the economics of the visual art market," European Economic Review, Elsevier, vol. 39(3-4), pages 509-518, April.
    3. Martin Shubik, 2003. "Dealers in art," Chapters, in: Ruth Towse (ed.), A Handbook of Cultural Economics, chapter 24, Edward Elgar Publishing.
    4. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
    5. Holger Bonus & Dieter Ronte, 1997. "Credibility and Economic Value in the Visual Arts," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 21(2), pages 103-118, June.
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    Cited by:

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    2. Nauro F. Campos & Renata Leite Barbosa, 2009. "Paintings and numbers: an econometric investigation of sales rates, prices, and returns in Latin American art auctions," Oxford Economic Papers, Oxford University Press, vol. 61(1), pages 28-51, January.

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    More about this item

    JEL classification:

    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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